Social Security History

This is an archival or historical document and may not reflect current policies or procedures.

Arthur J. Altmeyer

Social Security Bulletin
Volume 8 August 1945 Number 8The First Decade in Social Security

Arthur J. Altmeyer
Commissioner for Social Security

TEN YEARS IS a short time in which to measure social
advance. A relatively modest proposal for social legislation has
often taken a decade or more to develop the public understanding
and support that finally made it law in a State, and perhaps a generation
before it became a reality for any substantial part of our people.
Yet in the 10 years since August 14, 1935, when the Social Security
Act became law, the United States has built a comprehensive system
of old-age and survivors insurance and Federal-State systems of
unemployment insurance and public assistance in all the States and
Territories.

For perspective we may look back at the early years in workmen's
compensation, the only form of social insurance in which the United
States had comprehensive experience before 1935. What was probably
our first official study and report in this field of social legislation
was issued in 1893. Ten years later, only one limited State law,
later declared unconstitutional, was on the statute books of the
Nation. At the end of another 10 years, less than half the States
had workmen's compensation laws that had survived the scrutiny of
the courts, and the first Federal law, enacted in 1908, covered
only civil employees of the Government. Even now, after more than
half a century, not much more than half the workers of this country
are protected, and one State still has no law to compensate workers
injured on the job.

Probably never before in a corresponding period of time has legislation
done as much to establish a ground work of economic security for
families in the United States as in the years following President
Roosevelt's message of June 8, 1934, in which he said to Congress:
"Among our objectives I place the security of men, women, and
children of the Nation first."

At the End of a Decade

Today some 40 million people are insured under the Federal system
of old-age and survivors insurance. That is, they have credits toward
old-age benefits, and, if they should die today, monthly benefits
or a lump sum would be payable to the survivors named in the act.
Their survivor insurance alone represents $50 billion in family
insurance protection. The amount of retirement benefits depend,
of course, on a worker's whole wage record when, at or after age
65, he leaves covered employment.

Additional millions of workers have some credits toward benefits.
In all, more than 74 million persons, about two-thirds of the total
population aged 14 and over, had credits under the system by the
middle of 1945. By that time, benefits totaling more than $23 million
a month were in force for some 1.3 million persons. These include
about 760,000 old people-- workers, their aged wives or widows,
and aged parents of deceased workers who left no widow or child;
380,000 children of deceased or retired workers; and 145,000 widows
who have the child or children of a deceased worker in their care.

Under the Federal-State system of unemployment insurance, about
36 million workers have wage credits that will qualify them for
benefits if they are thrown out of work involuntarily and are unemployed,
and additional millions have credit toward benefits. Over the whole
period from January 1938, when nearly half the States began payment
of unemployment benefits, through June 1945, some $2.2 billion has
been paid under the State systems to replace part of the wages lost
by insured workers who were unemployed through no fault or wish
of their own. In recent years the annual disbursement has been relatively
small, because few workers lost jobs and most of those who did found
other work before they had completed the waiting period or had received
more than a few of the weekly benefits for which they would have
been eligible.

The importance of unemployment insurance was clear not only in
the 1930's but also in the dislocations of the war years when plants
have had to shut down to re-tool or await materials. Now we enter
the uncertainties of industrial reconversion with a backlog of more
than $6 1/2 billion in State reserves for unemployment insurance
and a Nation-wide administrative organization experienced in the
operation of unemployment insurance. Never before in our history
have the workers of the United States had such a resource for weathering
postwar changes or other widespread economic readjustment.

Because social insurance is so new in the United States and still
is incomplete in both coverage and scope, it has been imperative
that the social security program include a comprehensive method
of giving immediate aid to needy people who have not had an opportunity
to build up social insurance rights or who meet with some misfortune
not covered by social insurance. The three assistance programs for
which the Federal Government makes matching grants-in-aid to States
meet immediate need among three groups who are unable or little
able to earn their own living--needy old people, blind people, and
children who lack parental support or care because of the death,
absence, or incapacity of a parent.

Wartime conditions have made it possible for many people to leave
the assistance rolls or to get along without asking for public aid
which they might have needed in ordinary times. In the tight labor
market, some old or handicapped people and some mothers and children
have found jobs they could do, while others have benefitted from
increases in the earnings of members of their families or from allowances
as servicemen's dependents. Even so, more than 2 million old people,
about 1 aged person in 5, are receiving old-age assistance on the
basis of need. Aid is being given under the Social Security Act
to more than 50,000 blind persons and to about 650,000 children
in more than a quarter million families.

The Roles of Insurance and Assistance

For children, the role of social insurance in helping to prevent
need is already becoming clear. More fatherless children are receiving
benefits under old-age and survivors insurance than are receiving
aid to dependent children because of the death of the father. For
the aged, the insurance system takes a longer time to get under
way. The old people now on the assistance rolls average about 75
years in age and are frequently in failing health. Many of them
had passed the age for active work by 1937, when wage credits began
to accrue under the insurance system.

Moreover, many of the people now old have had most or all their
past work in jobs that still are not covered by the insurance system,
such as farming, their own small businesses, or domestic work. Even
if they have been able to work at some time after 1936, they have
had little experience to offer in employment covered by the insurance
system. Until war tightened the labor market, elderly people in
general found it hard to get jobs, and many used up whatever savings
they had during the hard times of the 1930's.

As time goes on, of course, an increasing proportion of the people
reaching retirement age will have had, at some time during their
working lives, enough covered employment to qualify them for at
least minimum insurance benefits. As coverage is extended, insurance
benefits will more often replace part of the loss of earnings among
the aged and the unemployed and among families with fatherless children.
If the scope of the program is extended to include cash benefits
to sick and disabled workers and their dependents and insurance
against costs of medical and hospital care, it will go far toward
cutting down another great cause of poverty and insecurity.

But however comprehensive the insurance provisions, they must necessarily
be fixed in relation to the common needs of large groups of people
and the levels of protection that the system can afford to provide
for large numbers. . Some people, such as those handicapped from
birth or childhood, will be unable to meet the eligibility requirements
of an insurance system. We shall always need a complementary program
of assistance to meet the needs of people who are not eligible for
insurance benefits or who suffer a misfortune that causes their
need to be greater than the system is designed to insure.

Fears That Proved Groundless

Thus now, at the end of 10 years, millions of people have some
basic security of income because of the operation of the Social
Security Act, and many times that number have assurance of some
protection for themselves and their families if they lose their
jobs or die or when they are old. Impressive as the figures are,
however, they are probably not the most significant achievement
of the program during its first decade. That, I believe, is the
place which social security has made for itself as a part of our
democracy and our American way of life.

It is hard now to recall some of the remarks made about social
security in 1935 and 1936. It was unconstitutional, some people
insisted. Unworkable, said others, who pointed to our lack of experience
in administering social insurance, made dark predictions of political
chicanery, and hinted that no worker would ever draw a benefit.
Some insisted that the program would bankrupt the Nation. Still
others were concerned with moral hazards. Social security, they
declared, was a Prussian invention to regiment people or, on the
other hand, a first step toward communism. It would destroy individual
enterprise and initiative and individual and family responsibility,
perhaps even destroy our competitive economic system.

Actual experience quickly belied all such charges. In the spring
of 1937, the Supreme Court stilled any doubt as to the constitutionality
of the insurance provisions of the act. The program has worked--probably
even better in some respects than its sponsors dared hope. In a
few weeks at the end of 1936 and in early 1937, in collaboration
with the post offices, we accomplished the unprecedented job of
registering more than 23 million workers to be covered by old-age
and survivors insurance and of setting up individual accounts to
record their taxable earnings. In spite of employers' and workers'
unfamiliarity with wage reporting, the records of earnings posted
to these accounts and to nearly 60 million subsequently established
accounts have been kept with only an insignificant percentage of
error. The mechanical techniques adapted or invented for these purposes
make it possible to maintain a worker's account for about 17 cents
a year.

Four years after the Social Security Act was passed, the 1939 amendments
extended old-age insurance to include survivor benefits and advanced
the date for paying monthly benefits by 2 years, but claims were
adjudicated promptly and benefits paid on time. By July 1939 all
State unemployment insurance systems were paying benefits. The availability
of Federal grants-in-aid enabled the States to extend and improve
their public assistance programs greatly, and in many places to
establish a program for the first time for needy old or blind people
or needy children.

Throughout State and Federal social security agencies, careful
selection and training of staff and hard work overcame the initial
handicap of lack of experience. Operating universally under merit
systems for personnel, these agencies have achieved a record of
impartial and efficient administration. They have worked out successfully
many new techniques in intergovernmental collaboration.

Disbursements under the program have been less than was estimated
in advance, especially in relation to earnings. With the country's
recovery from depression, expenditures have been a far smaller relative
charge on our economy than was contemplated in 1935.

The less tangible fears could have been discounted in advance by
anyone who had looked back at other chapters in the social development
in this country. A century earlier, some people were saying that
public education ran counter to the American principles of government
and would destroy freedom, the home, and individual initiative and
responsibility. Similar remarks were made later when legislation
was proposed to control conditions and hours of work, establish
minimum wages, compensate industrial accidents, or establish methods
of protecting the community's health. Nearly all of us would agree,
I think, that the United States is a far stronger, freer, and richer
Nation than it could have been if the alarmists who opposed such
legislation had had their way. Freedom to be illiterate or sick
or hungry is not a freedom to be prized by a people or by individuals.

Social Security and Self-Responsibility

If proof were needed that social security does not endanger the
moral fiber of the Nation, the war years would give it. As jobs
opened up in wartime, the assistance rolls went down. In old-age
insurance the rise in the beneficiary roll has been much less rapid
than would have been expected at this stage in the development of
the system. For every aged worker who has claimed benefits, there
are about two who, though eligible, are not taking their payments
because they have continued to hold or got jobs in covered employment.
Most of those who have retired were not physically able to continue
to work. In unemployment insurance, likewise, the very small beneficiary
rolls have been heavily weighted with old people, handicapped people,
and women with little work experience-- the last hired and the first
fired. Even claimants who have drawn benefits have generally been
quick to find other jobs and so leave the rolls.

The social security program thus has been operating, as its founders
intended, as a means of replacing part of the wage loss of workers
who find themselves unable to earn and of helping people who lack
the means of subsistence in even a period like the present. The
operations of both insurance and assistance programs show that Americans
continue to prize their capacity for self-support and family support
and will and do work when they can.

The advance fears came from our primitive distrust of anything
different, anything new and hence strange. Such fears are not confined
to social legislation. Locomotives, bathtubs, and even automobiles
were held by some people to menace morality and civilization when
they were first introduced. Because social legislation is designed
to conserve and enhance human values, it bears on the relationships
that people cherish most deeply--their relationship to their work,
to members of their family, to the community. So anything that seems
like a new element in such relationships is especially likely to
be feared in advance.

As I see it, however, the world-wide concern for social security
in recent decades and especially in these last 10 years is not an
effort to inject something new in those basic relationships. Its
purpose is to conserve what men and women have long cherished in
the face of changes they themselves cannot control individually.
President Roosevelt had that objective in mind in the initial message
on social security he sent to Congress in June 1934: "Security,"
he said, "was attained in the earlier days through the interdependence
of members of families upon each other and of the families within
a small community upon each other. The complexities of great communities
and of organized industry make less real these simple means of security.
Therefore, we are compelled to employ the active interest of the
Nation as a whole through government in order to encourage a greater
security for each individual who composes it . . . This seeking
for a greater measure of welfare and happiness does not indicate
a change in values. It is rather a return to values lost in the
course of our economic development and expansion."

At the end of this first decade, that general idea has permeated
much of our thinking. We in the Board see it in letters from old
people telling of their joy in receiving the small benefits which,
with their other savings, will enable them to live out the rest
of their lives in independence and modest comfort. We see it in
letters from widows who write to say that the benefits based on
the dead father's earnings will enable them to give their children
a fair start in life. We see it also in appeals from those who write
to ask why the program is not extended to their kind of work so
they, too, can earn this assurance for themselves and their families.

I have not heard anyone question recently the value and importance
and permanence of the social security program in general. Likewise
there seems to be a general belief that social security will be
strengthened and extended. When it comes to specific proposals for
improving the program, however, the fears of some people begin to
bristle, and again we hear many of the same objections that were
made 10 years ago to the initial proposals. I can only believe that,
as in the past, they will prove groundless.

Rights to Insurance and Assistance

The months and years just ahead will test public understanding
of the program and of the adequacy of its provisions and administration.
We may expect an upturn in claims for old-age and survivors insurance
from people who are now eligible but are not taking their benefits.
As war plants cut back and servicemen return, many older workers
and inexperienced workers will find they must or wish to give up
paid work and will claim their benefits under this Federal system.
In unemployment insurance, too, many workers will have occasion
to draw on their insurance rights, for which contributions have
been paid by their employers--in a few States, by the workers as
well.

All unemployment insurance laws include certain tests to show that
a person is genuinely unemployed. In addition to having the necessary
wage credits that show he has worked in covered employment, he must
be able to work and available for work, must report regularly at
the employment office, and be willing to take any suitable work
offered him. Benefits cannot be denied, however, if he refuses unsuitable
work or work which is below the community's standards for that kind
of a job in rate of pay, hours, or other working conditions; these
provisions protect not only workers but conscientious employers
and the community generally. Up to the number of weeks of benefits
to which his wage credits entitle him, the worker who cannot find
another job has a fraction of his former earnings to live on while
he looks for work that he is equipped to do.

During the wartime labor shortage, some people have contended that
a person who lost his job should be obliged to take any work that
was open or forfeit benefits otherwise due him. They haven't stopped
to think that an elderly bookkeeper, for example, ordinarily is
not physically able to take a job in a foundry or acceptable to
the employers no matter how badly foundry workers are needed. A
musician who lost his job when the curfew was imposed usually could
not be expected to become an efficient truck driver or tend a mangle
in a laundry. At any one time some people who fall out of work do
not match the jobs that are open, even when the openings are many
and urgent. At best, benefits represent about half, and now more
commonly one-third, what a man has been earning in the months before
he lost a job. Benefits are not paid for the first week or two of
unemployment and continue for only a limited number of weeks of
unemployment. Thus there is no lack of economic pressure on most
beneficiaries to take jobs when they can get them.

In the war years, people have been urged, as a patriotic duty,
to take new work and develop new skills. Some of them would have
done so anyway; the war has only given them a better chance than
they would have had otherwise. For others, the war has meant perhaps
the chance of a lifetime to escape from disagreeable, low-paid jobs
to which they hope never to return. Particularly because of the
hard times for years before the war, many workers have known for
the first time what it is to have regular earnings that give them
and their families a decent livelihood and perhaps some chance to
save. As the reconversion progresses and many people have to look
for new and different jobs, often in different towns or cities,
decisions on "suitable work" that are just and reasonable
for all concerned will become increasingly difficult.

Changes in the labor market that will force out older people and
inexperienced workers are also likely to force an increasing number
of people to have recourse to what is now recognized as the right
to assistance. Rights to social insurance are conditioned on wage
loss; rights to public assistance, on need, but they are both rights
recognized by law. The Social Security Act sets up several safeguards
to this right to assistance. Aid must be given in money, which the
recipient is free to spend as he thinks best, just as people spend
other money. If he disagrees with the decision made in his case,
the assistance agency must give him a fair hearing. Any personal
information he gives the agency must be held confidential.

Now these requirements were not established merely as a kindness
to the recipient. They are intended to help him and his family to
remain or become the kind of persons the community wants--self-respecting,
self-responsible, capable of managing their own affairs. If the
recipient has the capacity to become fully self-supporting, these
provisions will help him to do so. Children who are being aided
because their father is dead or disabled or absent should not be
branded as different from other children in the community; that
is one way in which poverty and dependency may be continued from
generation to generation.

Being needy is not a condition which people seek. Few in this country
would consider the subsistence levels at which assistance recipients
live an enviable lot. The more we learn about the conditions that
cause need or are associated with need, the more. impossible it
becomes to draw the old distinctions between the worthy and unworthy
poor. Probably assistance will always seem somewhat of a stigma
to most people who receive it, because in a money economy there
is a sense of personal failure and limitation in not having enough
to live on. But as communities fully recognize the right to assistance
on the part of persons who lack what is necessary for a minimum
level of decent human existence, they will help to wipe out the
conditions that make for hopelessness and lack of thrift and tend
to perpetuate dependency.

Both the insurance and assistance programs under the Social Security
Act are built on the assumption that it is hope, not fear, that
leads people to exercise initiative and assume the responsibilities
of citizens in a democracy. This seems to me not only a reasonable
assumption from our prevailing experience with human nature, but
also a necessary assumption if we are to hold to the principles
of a democracy.

Next Steps in Improving Social Security

In these first 10 years of its development, social security measures
have been focused on the needs of particular groups. In 1935, when
the act was formulated, the unemployed were in the forefront of
everyone's mind. Both legislators and the general public were also
becoming increasingly aware of the problem of old-age dependency.
That was inescapable, not only because the depression had wiped
out the lifetime savings of many aging people, but also because
the proportion of the aged in the population was increasing and
city life often brought changed circumstances. There are relatively
fewer sons and daughters to care for the old people, and city flats
cannot be stretched to care for additional members of a family.
Most city people have to buy, rather than raise, the families food;
support of aged relatives therefore more often has to be measured
in money, rather than in work that old people themselves can share.
In city life, children also are no longer an economic asset to a
family as they were, and to some extent still are, in country life.

Now we are beginning to think less in terms of groups or categories
of people and more in terms of the risks to economic security that
strike nearly all families at some time in the course of their existence.
From this standpoint, our program is still far from complete.

American workers and their families still lack any comprehensive
insurance provision against two prime causes of poverty and dependency--
wage loss in sickness and disability and costs of medical care.
Our basic insurance program--old-age and survivors insurance--still
covers only about three-fifths of all the jobs in the Nation. In
unemployment insurance, coverage is even more limited, and the amount
a jobless worker gets and the number of weeks for which he can draw
benefits if he remains unemployed differ greatly from State to State
for workers with similar records of past earnings. Contribution
rates differ likewise for employers in the same business and with
like records of employment experience.

Standards of public assistance also vary greatly among the States,
chiefly because of basic State differences in economic capacity,
the limitations of our present system of matching Federal grants-in-aid
for the three special types of assistance, and the lack of any Federal
participation in financing general assistance. States with only
small resources of their own can now claim only small amounts of
matching Federal funds, though presumably their assistance needs
are greater than those of States which have large resources and
so can get large amounts in matching Federal funds.

At the end of these 10 years we have the information and experience
to enable us to round out the social security program in terms of
the risks it should cover and the groups of the population for which
it should afford protection. Contributory social insurance is a
method which can be used to compensate any of the major risks of
wage loss--sickness and extended disability, unemployment, retirement,
and death, as well as the costs of medical care. A comprehensive
social insurance system could afford protection to all to whom these
risks apply. It could have the simplicity and economy attainable
through use of a single set of wage records, a single contribution,
a single set of local offices to administer all types of cash benefits.

In public assistance, studies of the Board have indicated the desirability
of providing special Federal aid, on an objective basis, to States
with only small resources of their own, in addition to the 50-50
Federal grant, so that they too would be able to provide their needy
people with a decent minimum level of subsistence. Federal participation,
the Board also believes, should extend to general assistance and
should include sharing the costs of providing medical care to needy
persons.

The Course of Development

Our present concern with problems of rounding out protection against
economic risks and of harmonizing the network of various types of
provisions that have developed more or less haphazardly under various
laws follows a course that has been evident in every country that
has adopted social security measures of one type or another. It
is perhaps notable that in this country we are approaching this
phase after only 10 years, while England, in which a comprehensive
reconsideration and revision of social security measures is now
under way, is undertaking it more than 30 years after adoption of
its first extensive program of social insurance.

In this process of development, two fundamental principles are
at work-- the principle of providing adequacy of benefits and that
of providing universality of protection. A program starts out by
establishing protection for a particular group that has aroused
public concern--injured workmen or old people or children or veterans
and so on. Then a law is passed to deal with a particular problem.
In time several laws may come to deal in different ways with various
parts of a problem. The people who are left out or have only an
inadequate share feel that they, too, should have protection. Then
comes the phase which we have already entered--trying to distinguish
and harmonize existing ways of meeting a problem and making sure
there is no avoidable gap and no undesirable overlapping.

Under adequacy of benefits I place not only the amounts but also
the simplicity and objectivity and certainty of the provision. Here
much has already been accomplished but much remains to be done.
Hardly is a law on the statute books before some one proposes some
way to improve it. People who distrust social security anyway are
likely to complain about the entering wedge or to say, give an inch
and they take a mile. But social security is so close to the essentials
of our thinking and living that it too cannot help but be evolutionary.

Few people are content to accept for themselves the income and
houses and other possessions that their parents or grandparents
considered rather satisfactory. If we believe that the United States
will continue to develop, we must believe that social security will
also evolve and must realize that no particular set of provisions
or dollar amounts will ever represent a constant or general standard
of adequacy.

Our Objectives in Social Security

Our social security program reflects the kind of economic and political
order we want. That, I take it, is a democracy which provides opportunity
for and yet rewards individuals in accordance with their capacities
and efforts. Thus our social insurance benefits, unlike those in
some other countries, differ in amount according to the beneficiary's
past earnings.

But enlightened self-interest, as well as common humanity, requires
that we set a floor beneath which human beings in our civilization
shall not sink. Only in that way can an industrialized society preserve
political democracy and a competitive economy in accordance with
our traditions. By setting and maintaining such a minimum, we help
to ensure an effective labor force and the steady stream of widely
diffused purchasing power needed to keep workers steadily and fully
employed.

In terms of social security, this objective is expressed in various
ways. It is expressed in the relatively larger benefits of lower-paid
workers, whose need is presumably greater, and in benefits to compensate
for part of the loss in purchasing power which occurs when a man's
capacity to earn is cut short temporarily or permanently for any
reason that he himself cannot control. It is inherent in special
provision for the worker's dependents and in the recognition of
the right to assistance on the part of needy persons. In financing,
it requires the recognition that the people as a whole, as taxpayers,
have not only an obligation but an interest in supporting any part
of the costs of needed social insurance provisions that cannot be
borne justly by the contributors themselves.

When President Roosevelt signed the Social Security Act in 1935,
he called it the "cornerstone in a structure which is being
built but is by no means complete . . ." The amendments of
1939 greatly strengthened certain parts of the program but left
other needed protection still unrealized. The Social Security Board,
in accordance with its responsibility for studying and reporting
on ways of improving economic security, has outlined on other occasions
its view of changes that are necessary and now feasible. Our success
in achieving "domestic tranquillity" and lasting peace
will depend in no small measure on the ability of this and other
countries to achieve greater security for their peoples. In these
first 10 years we have laid the foundation for that effort.

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